There are many issues to take into consideration when looking towards 2015 and your investment objectives. Those who look back at 2014 as a guide for performance over the next 12 months need to think again as it is likely 2015 will be very different indeed.
Worldwide interest rates
Even though the worldwide recession began back in 2008 we are still feeling the consequences with interest rates still at record lows. These minimal interest rates have obviously assisted investment markets making finance available at affordable rates – but this cannot continue forever. We have seen a number of central banks around the world suggesting that interest rates will rise in the short to medium term and this will eventually curtail over exuberance in the worldwide real estate market.
It is difficult to say when interest rates will rise because the economic recovery seen in the first half of 2014 has in many cases not followed through in the second half. Governments and central banks around the world will be keen to maintain low interest rates if economies are not performing as they would lose confidence amongst investors if they raise interest rates and are then forced to reduce them again.
There will always be real estate hotspots around the world such as London and Dubai but on the whole many experts believe that 2015 could see a reduction in investment demand for real estate. Some will argue that the best deals and more attractive returns emerged in 2014 and an increase in many real estate markets around the world has moved them back towards fair value.
We may well see an array of government incentives around the world, such as those currently being offered by the UK authorities, to breathe some life into local property markets. However, it is unlikely that demand will remain as strong as it was during 2014.
The Euro crisis
Despite the fact that many believed the Euro crisis was over, events in Greece over the last 48 hours have proved this to be woefully optimistic. There is talk of a new Euro crisis in 2015 which would obviously have a detrimental impact upon the European real estate market and investor sentiment/confidence. It may well turn out that the Greek problem is short lived but any doubt in the minds of investors will see many holding back further investment in property. Some experts believe that the long-term future of the Euro is by no means secured.
Looking back over the last 12 months there is no doubt the 2014 was a relatively good year for worldwide real estate markets. The aftermath of the 2008 worldwide recession has pushed prices towards what many saw as good value. It is unlikely that 2015 will be as dramatic and as active as 2014 but there will be new trends and new hotspots emerging around the globe. There is still money to be made but investors may need to work a little harder during 2015.